Question

Financial managers and investors use time-value-of-money techniques when assessing the value of the expected cash flow...

Financial managers and investors use time-value-of-money techniques when assessing the value of the expected cash flow streams associated with investment alternatives. Indicate two aspects of the time-value-of-money that can also be of interest to you in personal finances.   Describe how the concepts of future and present value can be adopted into your daily life style. Will this additional understanding of time value make a difference to you or is it too complex to routinely adopt?

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Answer #1

Time value of money means that the money you have now is worth more than the same money you have in future because of its earning capacity during the period.Personal finance means managing of savings and investment of an individual.In includes insurance, investment,banking, retirement planning etc.Time value of money plays important role while doing any mode of personal finance.The rate of return on investments and the amount of cash inflows and outflows all will depend on the time of value of the money.

In our daily life style we uses the concept of time value of money in various situations.If we want to receive or pay certain sum in future and we want to make deposit today then we uses time value of money in this scenario.It makes our daily life easier by understanding the concept of time value of money.

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